On Wednesday 26 October, European Commissioner for Taxation Pierre Moscovici said that France needed to provide clarification about its research tax credit scheme that comes under the heading of patent boxes, a regime favourable to intellectual property.
Within the code of conduct group of the Council on corporate taxation, France has been refusing since June to change its regime to come into line with the OECD approach, as it argues that its regime is not damaging (see EUROPE 11568).
In 2014, the code of conduct group agreed to change these schemes to come into line with the OECD standard ('modified nexus approach'), which aims to link the real economic activity to the tax advantage. France argues that its tax regime is frankly unattractive to anyone wishing to operate aggressive tax planning, with a tax rate of 15%.
Moscovici explained that the code of conduct group would have to analyse this, but that he is entirely convinced that as all states have undertaken to follow the new approach, France will need to provide clarifications on these questions. He went on to add that the subject may be on the agenda of the forthcoming meeting of European finance ministers on 8 November.
CCCTB. The European Commission on Wednesday relaunched its plans for a common consolidated corporate tax base, which provides, amongst other things, for a super-deduction for costs related to research and development (see EUROPE 1654 and 11647). It has pledged not to legislate on patent boxes, due to the international agreement on this regime, but its own view is that with the new CCCTB rules, patent boxes will be headed for extinction. Major companies with a turnover of €750 million and above will be required to subscribe to the CCCTB and will therefore no longer have access to anything other than the tax incentives laid down in the CCCTB, which the Commission has deliberately devised in such a way as to avoid abuses. It obviously remains to be seen what the member states will do with the text. Moscovici stressed that the Commission is not presenting its own systems in order to get round any particular legislation that takes insufficient action. It is not a ruse or a circumvention, but an encouragement aimed at supporting investment, he said.
On behalf of European business, BusinessEurope welcomed the CCCTB proposals on research and development. More generally, the organisation prefers to wait to discuss the proposal in detail before it takes position. Aurore Chardonnet from Oxfam welcomed the Commission's proposal, but added that it was disappointing that the Commission is proposing tax breaks in order to facilitate a political agreement between the member states and gain the support of multinationals. If the aim is to encourage smaller groups and start-ups to consider the regime where they have high research and development costs, then the interaction with aspects such as the permanent establishment definition and the interest restrictions will need to be fully analysed and reflected in the final design, said Chas Roy-Chowdhury, on behalf of the international accountancy experts represented by ACCA. (Original version in French by Élodie Lamer)